Challenging Conditions See Revenue and Profits Down at ICAP


LONDON -- ICAP -- the world's leading inter-dealer broker and provider of post trade risk and information services -- published its full-year results to the end of March 2013 this morning.

Group revenue was lower by 12%, at 1,472 million pounds and pre-tax profit was down 20%, to 284 million pounds, although that is slightly ahead of previous guidance given by the company.

In the bright side, the company did manage to deliver 60 million pounds of cost savings over the year, which is 10 million pounds more than had been expected. This is equivalent to an annualized saving of 80 million pounds -- 33% (20 million pounds) more than had been previously announced.

The board has proposed a final dividend of 15.4 pence per share, bringing the full-year dividend to 22.0 pence per share, the same as last year.

Commenting on the results, Michael Spencer, ICAP's Group Chief Executive Officer, said:

This has been an extraordinarily tough year in the wholesale financial markets. Trading activity across all asset classes was negatively affected by a combination of cyclical and structural factors including the depressed global economy, a low interest rate environment and lack of clarity around some aspects of regulatory reform. ICAP's financial performance reflects these extremely challenging conditions.

We have exceeded our annualised cost savings target by 20 million pounds, resulting in expected annualised run-rate savings of 80 million pounds and a more flexible cost base going forward. ICAP remains a profitable and a very cash generative business with a strong balance sheet. Today we are a more efficient and collaborative business than we were a year ago and this will stand us in good stead for the future.

ICAP's share price is currently up over 6% this morning, but that has to be seen in the context of a share price performance that has been both downhill and turbulent ever since the global financial crisis began. It's still 60% off its high at the end of 2007 and 14% lower than this time last year.

So, while ICAP currently offers very attractive yield of 7%, it is, perhaps, only at the expense of what's been a progressively declining capital value, which may well deter income-seeking investors.

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